With the ongoing high demand for low emission vehicles and rising gasoline prices, the electric vehicle (EV) market continues to gain momentum around the world. Notably, the global EV sales stood at 851,000 units in March 2022, representing a 60% year-over-year increase, with a considerable market share of 15% for March 2022.
However, the EV industry benchmark, Global X Autonomous & Electric Vehicles ETF (DRIV), presently trades near its 52-week low, plunging about 26% since the start of 2022. Therefore, now could be a good time to scoop up shares of EV companies at a sizable discount.
Keeping that in mind, today, I’ll analyze and compare two EV stocks, Mullen Automotive, Inc. (MULN) and Lordstown Motors Corp. (RIDE), to see which stock is currently the best investment.
MULN is a development stage EV company that engages in the manufacturing and distributing of EVs. It also owns a digital platform known as CarHub that provides AI-powered solutions for buying, selling, and owning a car. RIDE develops, manufactures, and markets its full-size pickup truck, known as Endurance, for fleet customers.
Year-To-Date (YTD), shares of MULN have plunged about 77%, and RIDE has lost around 34% over the same period.
Click here to checkout our Electric Vehicle Industry Report for 2022
Recent Developments
On May 16th, Mullen Automotive provided an update on its cooperation with Linghang Guochuang Group, announcing that both companies have started integration of the solid-state polymer cell technology into the vehicle pack level. The company said those new batteries would be used in the second generation of its FIVE EV Crossover, enabling the vehicle to ride 600 miles on a full charge and over 300 miles of range delivered in 18 minutes with DC fast charging.
On May 11th, Lordstown Motors announced that it had closed an Asset Purchase Agreement with affiliates of Hon Hai (Foxconn), selling its Lordstown facility for $230 million, plus reimbursement of about $27 million in operating and expansion costs. Besides, the company entered into a new manufacturing supply deal for the all-electric pickup truck, Endurance. Lordstown plans to begin commercial production in the third quarter, with the first deliveries coming in the fourth quarter. Also, Foxconn and Lordstown agreed to create a new joint venture, MIH EV Design LLC, aiming to produce electric vehicles for the global market. Not surprisingly, this move was appreciated by investors, who pushed RIDE stock up over 39% in the subsequent trading sessions.
Recent Financial Performance
On May 13th, Mullen Automotive revealed a 10-Q filing for the quarter ended March 31st, 2021. The company has generated no material revenues to date as it is still in the development stage.
On the front of expenditures, Mullen's total operating costs and expenses advanced 484% YoY to $30.45 million, primarily driven by a 526% YoY growth in General & Administrative expenses to $29.27 million due to increases in professional services, marketing, and compensation-related expenses. Consequently, its net loss increased to $32.57 million, up 250% year-over-year.
Finally, Mullen Automotive substantially improved its liquidity position, holding $65.2 million of cash on the balance amid the issuance of Series C Preferred Stock at $8.84 a share. Also, its total debt of $22.1 million tends to decrease due to MULN's principal paydown, debt payoffs, and conversion of convertible debt to equity. With that, the company's liquidity looks confident with a low risk of dilution.
When it comes to Lordstown Motors' earnings report for the first quarter of 2022, the company did not recognize any revenue during the quarter, standing in line with the Wall Street consensus. Also, RIDE disclosed a GAAP EPS of ($0.46), again in line with analysts' estimates.
Notably, RIDE's total operating costs decreased 17.3% YoY to $87.88 million in Q1, mainly driven by lower Research and Development costs. Consequently, it turned into RIDE's net loss of $89.63 million, compared to a loss of $125.2 million as of 1Q21.
It is important to note that the company ended the quarter with about $203.6 million in cash and cash equivalents with a cash burn rate of $69 million in Q1. The company also noted that even with the closing of the Foxconn deal, it would need additional funding to execute its 2022 business plan, which is a potential red flag.
For the current quarter, Wall Street projects RIDE's EPS to increase 24.51% year-over-year to ($0.46), while its first notable revenues of $17.56 million analysts expect to see in the fourth quarter of 2022.
Comparing Options Market Sentiment
Let's consider the June 17th, 2022, option chain for both MULN and RIDE to define options market sentiment by analyzing the calls/puts ratio. In MULN's case, the open calls/open puts ratio at the $1.50 strike price comes in at 15.29x, implying a strong bullish options market sentiment. When it comes to RIDE, the open calls/open puts ratio at the $2.50 strike price stands at 0.79x, showing a bearish market sentiment.
The Bottom Line
I believe that MULN is a better pick than RIDE at the moment. The favorable news about RIDE's deal with Foxconn has already been priced in. Hence, its weak liquidity, coupled with a high risk of dilution, could hurt its share price in the future. When it comes to MULN, the company has made significant progress toward its future growth during the last quarter, optimizing its balance sheet and continuing its EV development efforts. And it also has a quite bullish options market sentiment, suggesting its share price appreciation in the following weeks.
MULN shares were trading at $1.12 per share on Tuesday morning, down $0.05 (-4.27%). Year-to-date, MULN has declined -78.59%, versus a -14.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.
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